Timothy Noah admits that he’s rich, at least by the standards he sets out in his new book The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It (Bloomsbury, 2012). He’s in the top 10 percent, which he defines as households making more than $100,000 a year. “But it’s amazing how offended people get when you say that,” he says. In America, “everyone wants to belong to the middle class.”
This is good in some ways, Noah insists. It reflects our “egalitarian ethic.” Yet it also obscures some of the disturbing economic realities of contemporary American society. Noah, a senior editor at the New Republic and a former senior editor at Slate, has been covering American life and politics for more than 30 years. The Great Divergence brings together data from America’s top economists, on both the right and the left, to explain why American society has become increasingly stratified, and why we should care. The book is based on a series in Slate that won the 2011 Hillman Prize, the highest award for public service magazine journalism. Noah, who lives in Washington, D.C., has also edited two volumes of writings by his late wife Marjorie Williams, a journalist who died of cancer in 2005: The Woman At The Washington Zoo (2005), winner of the PEN/Martha Albrand Award, and Reputation (2008).
When Annie Juergens Behr caught up with Noah recently at Birch Coffee at the Gershwin Hotel in Manhattan, he talked about how he would react if his own taxes were raised, what he thinks of Obama, and why voters should care about income inequality as much as they did 100 years ago “when there was genuine fear that if incomes got too unequal you would have, conceivably, violent overthrow of the government.”
Annie Juergens Behr (Rail): With their focus on the Buffet Rule and raising taxes on the very rich, Democrats are trying to make income inequality part of the debate in the upcoming election. Why should voters care about this?
Timothy Noah: Voters should care because taxes in general are at a historic low, and they are particularly low for people of higher incomes. Before Ronald Regan was elected president, the top marginal rate was 70 percent, and it had been lowered to 70 percent by L.B.J. Before that, they were above 90 percent throughout the 1950s. When we had fantastic post-war prosperity, the top marginal rate was at least 90 percent. The top marginal rate now is 35 percent. So, I think that really needs to change.
The Buffett Rule is a great idea, but I would go further. I would create new tax brackets for people over 1 million dollars and people over 10 million dollars, going up to 70 percent. I would eliminate the privileged treatment of capital gains. Capital gains should be taxed like every other kind of income. Obama is essentially proposing to eliminate the privileged treatment for millionaires, but we should eliminate the privileged treatment of capital gains for everybody.
Mostly, what this would do, is communicate a sense of basic fairness. As we struggle to reduce the federal deficit, which we will need to do eventually, and as we fund new programs like, hopefully, Obamacare, the burden needs to fall more heavily on those most able to pay for it.
Rail: What do you think of Obama?
Noah: I like Obama a lot. My feeling about Obama is that he has already, in one term, really in his first two years, accomplished more than any other Democratic president since Lyndon Johnson. The great worry now is the Supreme Court may undo his greatest accomplishment, which was national health care. But, the two things he did achieve, which were hugely significant, were Obamacare and the Dodd-Frank Wall Street Reform and Consumer Protection bill. Now, are these great laws? No. Each constitutes a necessary first step, and additional steps need to be taken. But, you have to start somewhere. We haven’t had a major financial reform bill in decades, and we have never had national health care, except for the elderly and the indigent. So, I think that Obama is already a historic figure.
You know, he’s better at some things than others. He, initially, was too bipartisan in his approach. He thought his good intentions would be rewarded by Republicans, and he learned the hard way that that wasn’t the case. Now, he’s a more partisan guy. He’s a more partisan guy running for reelection. I hope he stays a more partisan guy if he gets reelected. He probably will. I’m not certain, of course. But, unless the economy really tanks, I think he has a pretty strong likelihood of getting reelected.
Rail: The Republican aversion to raising taxes on the rich has been part of the political landscape for 30 years. I think many Americans, even many Democrats, have come to believe that raising taxes too much will stifle economic growth. What’s your response?
Noah: I would say—this is not a hugely original thought, a number of people have pointed it out—if raising taxes is so bad for the economy, why did we see fantastic prosperity during the Clinton years?
The relationship between taxes and the performance of the economy is complicated, and I think it’s far from axiomatic that raising taxes hurts economic growth. Failing to balance the budget can hurt economic growth too. Failing to bring the deficit under control—that can cause all sorts of economic problems. It exasperates me that Republicans will scream and yell about the deficit, but will refuse to consider a tax increase as part of the package, or will consent only to a small tax increase.
Rail: You must be making decent money. How would you feel about paying higher taxes?
Noah: I would be glad to pay higher taxes if I thought it was going to improve the economy. I would selfishly think that I would probably be in a position to enjoy greater security, and possibly even greater prosperity, if I were paying higher taxes. I am not a member of the 1%.
Rail: I wasn’t assuming.
Noah: Sadly. I wish I were. What I hope for my country and what I hope for myself are two very different things. I would be a fool to think otherwise.
I am rich, by the standards I lay down in my book. Anyone making over $100,000, in my book, is rich. And, it’s amazing how offended people get when you say that. They say, “I’m not rich, I’m middle class.” But, just look at the numbers. In the book I say, if we’re going to say that people in the top 10 percent aren’t rich, then by the same numerical logic, if your kid comes home with a 90 on his math test, then you have to tell him, well you didn’t get an A.
Rail: Right. But, this idea of the middle class, it’s sort of a definitional problem.
Noah: Everyone wants to belong to the middle class. And, in some ways that’s good. In some ways that suggests that there is an egalitarian ethic in the United States. But, in other ways, it papers over economic realities. I think it’s important that people recognize what people have.
My favorite issue of Parade Magazine every year, in fact, the only issue of Parade Magazine I ever read, is the one where they look at people’s incomes. It is always astonishing to look at all these people in all these various professions and see what they make. What really comes across to you is, it’s a role of the dice. You see people performing all kinds of work and some of them are making nothing, some of them are making a fortune, and it just doesn’t appear to make any actual logical sense.
One of the problems we have in this country is that there is greater geographic isolation between members of different classes. This is discussed a great deal by Bill Bishop in his book The Big Sort. People have been sorting themselves for the last 40 years, in all sorts of ways. The larger theme of the book is that people are less likely to run into people who are different from them in any particular way. But, that’s particularly true with respect to income. Your understanding of people who make less money then you do or more money then you do is limited by your limited contact with them.
This theme is picked up interestingly by Charles Murray in his new book Coming Apart, which is, in part, about the growing alienation between the affluent and the middle class. He talks about, in great detail, how dangerous it is and how disturbing it is. So, when people ask me, why do you care about income inequality, I say, read Charles Murray’s book. He’s a conservative and he’s worried about it too. The only difference is, Murray won’t concede that what’s driving this difference is income inequality. He thinks it’s purely cultural. And, I think he’s just in a fantasy world about that.
Rail: I love that F.D.R. proposed a maximum wage. Do you think we have lost sight of the fact that growing inequality wasn’t always the norm?
Noah: Yes. I think there’s only the dimmest understanding of that. There’s more discussion of this issue today than there has been at any time since the great divergence began in 1979, and I find that very heartening. But, it is still true that there are a lot of basic facts that people don’t fully grasp.
There are still people who say that it is the nature of capitalism that income inequality must always increase. It is not in the nature of capitalism. It was not in the nature of capitalism in the middle of the 20th century. Why should it be now? It is also not the nature of capitalism in other capitalist countries in Western Europe. I would actually argue the opposite, that there is a point when income inequality actually starts to damage your economy.
It’s certainly true that you need income inequality to some extent in a capitalist economy. I mean obviously, you need to reward effort and skill and enterprise. I don’t dispute that at all. But, the question is, how much do you need? There are, today, very prosperous economies that have a lot less income inequality. Germany would be a great example.
People need to understand that income inequality does not need to be growing constantly. I really try and emphasize in the book that my concern is the fact that it is growing and that it has been growing steadily for 30 years. I am not against income inequality per se. I am against the high levels in the United States and the fact that we don’t seem to be able to reverse the trend towards greater income inequality.
People used to think about this issue a lot more 100 years ago, when there was genuine fear that if incomes got too unequal you would have, conceivably, violent overthrow of the government. Once the elites discovered that all that was really going to happen was that you would see a lot of self-destructive behavior among the non-elites, and a lot of hopelessness, they realized that it wasn’t anything they needed to think about anymore. And, I applaud Charles Murray for bucking that. There is a lot I don’t applaud him for. But I do applaud him for that.